WuXi be­came a crit­i­cal part­ner to bio­phar­ma com­pa­nies. They’re not ready if the US cracks down

It’s hard to dis­en­tan­gle WuXi AppTec’s rise from Chi­na’s. Over the last two decades, the Shang­hai-based com­pa­ny grew from noth­ing in­to a re­search su­per­store for the world’s bio­phar­ma com­pa­nies.

But as ten­sions be­tween the US and Chi­na have grown, so have doubts about WuXi’s fu­ture. It has be­come so in­ter­twined with US drug­mak­ers and biotech star­tups that it’s now seen as a risk, both by some in Con­gress and by com­pa­nies that fear get­ting caught up in a geopo­lit­i­cal strug­gle over WuXi’s al­leged ties to the Chi­nese mil­i­tary.

In more than a dozen in­ter­views and through the re­view of se­cu­ri­ties fil­ings, End­points News was able to trace the po­ten­tial im­pact of a US crack­down on WuXi and its af­fil­i­ates. Drug­mak­ers like Am­i­cus Ther­a­peu­tics, Sound Phar­ma­ceu­ti­cals and Eli Lil­ly would like­ly face de­lays and short­ages should a bill in Con­gress or po­ten­tial US sanc­tions cut WuXi off from its part­ners. The re­port­ing dis­closed many of these in­dus­try risks, and a scram­ble for back­up plans, for the first time.

“If this hap­pens, this will cre­ate chaos with­in the sys­tem,” said Charles Achibiri, founder of Sci­Rank, a web­site where sci­en­tists re­view con­tract man­u­fac­tur­ers. “It could po­ten­tial­ly dri­ve some biotech com­pa­nies out of busi­ness be­cause the cost of tran­si­tion­ing to a new lo­ca­tion could be high.”

When it was found­ed 25 years ago by the chemist Ge Li, WuXi was a small play­er that of­fered on­ly lab chem­istry ser­vices. But over the years, the com­pa­ny and its af­fil­i­ates ex­pand­ed in­to drug dis­cov­ery, de­vel­op­ment and man­u­fac­tur­ing.

It was born at the per­fect mo­ment. The world’s ma­jor phar­ma com­pa­nies were turn­ing to out­sourc­ing and the still-young biotech in­dus­try had hun­dreds of star­tups that couldn’t af­ford large man­u­fac­tur­ing or re­search arms.

“They were there at the right time, the right place and with the right ca­pa­bil­i­ties,” said Kevin Lustig, the CEO of Sci­en­tist.com, a com­pa­ny that con­nects drug­mak­ers with con­tract re­searchers.

Last year, WuXi AppTec brought in $5.7 bil­lion in rev­enue, more than half of which came from the US mar­ket. Its af­fil­i­ate, WuXi Bi­o­log­ics, is ex­pect­ed to re­port more than $2.6 bil­lion in 2023 sales. WuXi com­pa­nies now con­trol the largest share of the con­tract re­search mar­ket, ac­cord­ing to Fitch Rat­ings, and claim they work with the 20 largest phar­ma­ceu­ti­cals.

Used across the in­dus­try

Un­der the pro­posed BIOSE­CURE Act, com­pa­nies that use WuXi ser­vices wouldn’t be el­i­gi­ble for gov­ern­ment con­tracts and po­ten­tial­ly even Medicare dol­lars. In re­sponse, pub­lic com­pa­nies have start­ed to de­tail risks from their re­liance on WuXi as part of fi­nan­cial re­port­ing re­quire­ments.

WuXi Bi­o­log­ics, which was spun off from WuXi AppTec in 2017, is the sole sup­pli­er of a lab-made pro­tein in Am­i­cus’ com­bo treat­ment for Pompe dis­ease, ac­cord­ing to a Feb. 28 reg­u­la­to­ry fil­ing.

When Am­i­cus’ drug was ap­proved last fall, the com­pa­ny fore­cast that sales could even­tu­al­ly reach $1 bil­lion an­nu­al­ly. But in the fil­ing, the com­pa­ny said pro­posed US ac­tions against WuXi could im­pact its abil­i­ty to “meet our fore­cast­ed fu­ture de­mand.” Am­i­cus did not re­spond to re­quests for com­ment.

A WuXi clam­p­down would im­per­il pri­vate­ly-held Sound Phar­ma­ceu­ti­cals and its plans next year to seek reg­u­la­to­ry ap­proval for its hear­ing loss drug. It has con­tract­ed WuXi AppTec for man­u­fac­tur­ing as well as tox­i­col­o­gy stud­ies.

“In terms of tim­ing and qual­i­ty, it’s hard to beat WuXi,” Sound CEO Jonathan Kil told End­points. Switch­ing providers could mean a two-year de­lay, he es­ti­mates.

And WuXi STA, a sub­sidiary of WuXi AppTec, is the sole provider of in­gre­di­ents in a pipeline of car­dio­vas­cu­lar drugs be­ing de­vel­oped by Struc­ture Ther­a­peu­tics, the com­pa­ny said in a March 8 fil­ing. Struc­ture was one of the few biotechs to go pub­lic in 2023, on the back of its GLP-1 weight loss drug.

"While we be­lieve that ad­e­quate al­ter­na­tive sources for such sup­plies ex­ist, there is a risk that, if sup­plies are in­ter­rupt­ed, it would ma­te­ri­al­ly harm our busi­ness," the com­pa­ny said in a re­cent fil­ing. In a state­ment, the com­pa­ny said it’s di­ver­si­fy­ing “the man­u­fac­tur­ing of our ac­tive phar­ma­ceu­ti­cal in­gre­di­ent and drug prod­uct.”

WuXi is al­so a cru­cial sup­pli­er to some of the biggest com­pa­nies in the world. Eli Lil­ly us­es WuXi Bi­o­log­ics to pro­duce a key in­gre­di­ent in the pop­u­lar weight loss drug Moun­jaro, Bloomberg re­port­ed last week.

In a state­ment, Eli Lil­ly said the com­pa­ny uti­lizes con­tract man­u­fac­tur­ers to ac­cel­er­ate pro­duc­tion of the drug. In build­ing out man­u­fac­tur­ing, the com­pa­ny prefers to “in­vest in­ter­nal­ly,” it said. In a Feb. 21 reg­u­la­to­ry fil­ing, Lil­ly said it’s de­pen­dent on “Chi­na-based part­ners” for chem­i­cal syn­the­sis, ma­te­ri­als and in­gre­di­ents, but find­ing al­ter­na­tive sup­pli­ers “may not be fea­si­ble or could take a sig­nif­i­cant amount of time.”

Ad­di­tion­al com­pa­nies, in­clud­ing Vir Biotech­nol­o­gy, Spyre Ther­a­peu­tics and Io­vance Bio­ther­a­peu­tics, ex­pressed po­ten­tial risks as­so­ci­at­ed with WuXi and al­ter­na­tive man­u­fac­tur­ing plans.

‘The risk that has al­ready hap­pened’

WuXi AppTec it­self has ac­knowl­edged the dam­age from even the threat of a ban.

“The risk that has al­ready hap­pened is rep­u­ta­tion­al­ly,” WuXi AppTec chief op­er­at­ing of­fi­cer Richard Con­nell told End­points last month.

Find­ing a WuXi al­ter­na­tive isn’t sim­ple. It takes time to switch, and not all man­u­fac­tur­ers have the ex­per­tise to pro­duce gene ther­a­pies, oligonu­cleotides and oth­er com­plex prod­ucts.

Ku­mar Srini­vasan — the CEO of pri­vate­ly-held Wu­gen, a com­pa­ny that us­es WuXi to pro­duce cell ther­a­pies — said there’s a grow­ing list of com­pet­ing con­trac­tors that say they of­fer the same ser­vices. But not all are cre­at­ed equal.

“It’s al­most like mak­ing a souf­flé. You can have the same in­gre­di­ents, but not every­one will make the same souf­flé,” Srini­vasan said.

Bri­an Sa­fi­na — the pres­i­dent and CSO of Mag­net Bio­med­i­cine, a start­up de­vel­op­ing small mol­e­cule drugs — said a WuXi crack­down could be “in­cred­i­bly dis­rup­tive” for com­pa­nies that are near­ing clin­i­cal test­ing.

“That could just com­plete­ly de­stroy a biotech,” Sa­fi­na said. “Imag­ine you're on a tight time­line, you’ve got cash run­ning out, and you’ve got to get in­to the clin­ic, and all of a sud­den they can't man­u­fac­ture your Phase I ma­te­r­i­al. I mean, that’s go­ing to be bad.”

Un­der threat

Last week, shares of WuXi com­pa­nies fell sharply af­ter the Sen­ate Com­mit­tee on Home­land Se­cu­ri­ty and Gov­ern­men­tal Af­fairs vot­ed to ad­vance the BIOSE­CURE Act.

The leg­is­la­tion al­leges that WuXi col­lab­o­rates with the Chi­nese mil­i­tary, as part of Chi­na's cam­paign to dom­i­nate the biotech sec­tor.

WuXi AppTec has award­ed funds to Peo­ple’s Lib­er­a­tion Army re­searchers; the com­pa­ny has re­ceived in­vest­ments from a Chi­nese civ­il-mil­i­tary fund; and the CEO of WuXi Bi­o­log­ics was a pro­fes­sor at a Chi­nese mil­i­tary acad­e­my, the bill states.

WuXi Bi­o­log­ics and WuXi AppTec have de­nied the claims and said they don’t pose a risk to US na­tion­al se­cu­ri­ty.

“WuXi AppTec is a val­ued con­trib­u­tor to the phar­ma­ceu­ti­cal and life sci­ences in­dus­tries and a trust­ed part­ner to cus­tomers in the U.S. and around the world,” the com­pa­ny said in a state­ment.

While the BIOSE­CURE Act threat­ens WuXi, the com­pa­ny isn’t the main fo­cus. The leg­is­la­tion is large­ly ded­i­cat­ed to Chi­nese ge­nomics com­pa­nies like BGI.

“WuXi’s al­leged ties are a much new­er fo­cus of Con­gress, com­pared to BGI’s,” said Sam Ide, a vice pres­i­dent at Asia Group’s Chi­na prac­tice, where he ad­vis­es clients on nav­i­gat­ing pol­i­cy.

There are some sig­nals that Con­gress might mod­er­ate its ap­proach. Sen. Gary Pe­ters (D-MI), the pri­ma­ry spon­sor of the BIOSE­CURE Act, has looked to grand­fa­ther ex­ist­ing con­tracts with WuXi com­pa­nies. His of­fice did not re­spond to a re­quest for com­ment.

But the risk to WuXi ex­tends be­yond leg­is­la­tion. Last month, Pe­ters and three oth­er law­mak­ers asked the De­part­ment of De­fense, along with oth­er gov­ern­ment bod­ies, to add WuXi en­ti­ties to black­lists that would im­pose ex­port and im­port con­trols.

In the crosshairs

In a sign of just how sen­si­tive the mat­ter has be­come, many large drug­mak­ers have been un­will­ing to pub­licly ad­vo­cate for WuXi, de­spite the risk to their busi­ness­es. That in­cludes stand­ing up for WuXi in Wash­ing­ton, for fear that they, too, will be­come a tar­get for law­mak­ers, said one per­son fa­mil­iar with the leg­is­la­tion and ad­vo­ca­cy around it.

Pfiz­er didn’t re­spond to a re­quest for com­ment re­gard­ing how it's nav­i­gat­ing the pro­posed leg­is­la­tion. John­son & John­son in a state­ment re­ferred ques­tions to trade groups, in­clud­ing the Biotech­nol­o­gy In­no­va­tion Or­ga­ni­za­tion, or BIO.

“We be­lieve BIO and PhRMA are in the best po­si­tions to dis­cuss the on­go­ing sit­u­a­tion with WuXi,” a John­son & John­son spokesper­son said, call­ing it “an in­dus­try-wide is­sue.”

BIO’s ad­vo­ca­cy on be­half of WuXi has made the trade group a tar­get. Rep. Mike Gal­lagher (R-WI), an au­thor of the House ver­sion of the BIOSE­CURE Act, last week sent a let­ter to At­tor­ney Gen­er­al Mer­rick Gar­land say­ing BIO should have to reg­is­ter as a for­eign agent and is ad­vanc­ing Chi­na’s in­ter­ests.

BIO stat­ed it hasn’t vi­o­lat­ed the For­eign Agents Reg­is­tra­tion Act, and the group be­lieves the leg­is­la­tion would cause too much dis­rup­tion to the in­dus­try. On Wednes­day af­ter­noon, the group an­nounced it planned to cut ties with WuXi AppTec.

Ed­i­tor's note: This sto­ry has been up­dat­ed with BIO's plans to cut mem­ber­ship ties with WuXi. Ryan Cross con­tributed re­port­ing.